Tuesday, February 21, 2006

The Russia's Leadership in Counterfeiting Not a FactRIA Novosti wire report regarding the International Intellectual Property Alliance pressing the US Government to block Russia's accession to the World Trade Organization until Russia creates "a system of reliable protection of intellectual property." Apparently these American business men are upset at the loss of money that they COULD be making in Russia.

Alexander Shokin, president of the Russian Union of Industrialists and Entrepreneurs, was right when he said that "piracy is the biggest headache for Russian business." Nevertheless, tireless efforts against it have not yielded tangible results. Why?

One of the main reasons of the failure is that the price of licensed products is too high for Russian consumers. The population's weak financial possibilities are in reverse relation to its longing for knowledge and new culture and art products. A well-to-do person will never go to the market to buy a pirated book, tape or CD from a stand, but there are few of them in Russia, Shokhin says. He believes that among other measures, it is very important to reduce customs duties on imported items of intellectual property. Also, foreign copyright holders should move production to Russia, thereby reducing the cost of their products for Russian consumers.

These measures sound accurate, but I can't see how these changes would happen very quickly - and they don't address the fact that counterfeiters are making money at doing this, at relatively small risk of punishment (or so it seems to me). The article continues:

Loopholes in the Russian legislation also encourage piracy, and so do mild punishments that are inadequate to the scale of the offense, which many people acknowledge. A high-ranking officer in the Interior Ministry's economic crimes department, who has been fighting against intellectual property-related crimes for several years, says that piracy can be stopped only by force. To do so, cases of piracy should be tried in courts of general jurisdiction rather than arbitration courts; and amendments should be introduced to the Criminal Code to make punishment for piracy tougher.

Many of such crimes are punished with death sentence in the United States and with life imprisonment in Turkey, he says. In his opinion, it is important that a new generation of Russian businessmen would be afraid to produce pirated products. Today neither sellers nor buyers are afraid of getting long prison terms.

In 1994, as part of an omnibus crime bill, the federal death penalty was expanded to some 60 different offenses. Among the federal crimes for which people in any state or territory of the U.S. can receive a death sentence are murder of certain government officials, kidnapping resulting in death, murder for hire, fatal drive-by shootings, sexual abuse crimes resulting in death, car jacking resulting in death, and certain crimes not resulting in death, including the running of a large-scale drug enterprise.

Also worth noting - the figures they give for American business losses due to counterfeiting in Russia versus China are $1.75 billion and $2.53 billion, respectively. Considering the populations in these two countries 143 million vs. 1.3 billion - I think that puts Russian comfortably in the lead in counterfeiting on a per capita basis.

Personally, I don't really care if some filthy rich American businessman is or isn't getting his cut of profit from selling toothpaste in Russia. However, it is a risk for consumers in Russia, when at any time they aren't sure if the bottle of wine they are buying is genuine, or some colored rubbing alcohol.

Katja actually wouldn't let me buy any wine or alcohol at the grocery stores in Yaroslavl. She looked at the price and declared that it must be counterfeit. She acknowledged that it was a big problem there and you can never be sure if something is real or not. She drinks Borjomi rather regularly and says at least a few times she feels she might have gotten fake Borjomi (maybe more than a few).

The problem is too many people are making too much money making fakes - and Russia really hasn't yet shown the stomach for taking on organized crime. The risk has to become greater than the reward ... either the risk must increase or the profit must decrease. I think it will be quite some time before either happens.

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